The Factors That Determine Home Loan Rates

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Anyone who is looking to buy a home in the near future is probably paying close attention to mortgage rates and trends. In recent years we had gotten used to extremely low rates making money cheap only to have them increase dramatically and now taper off a bit. But what exactly makes the home loan rates fluctuate? While the answer can be slightly complicated, here is some more details on some of the most influential factors.

Inflation and Federal Reserve

While the Federal Reserve (Fed) does not determine the rates directly, they do in fact move the Federal Funds Rate as a response to economic factors. These include things like inflation, employment rates, the economy, etc. When this occurs, the mortgage rates often follow suit. Business Insider explains “The Federal Reserve slows inflation by raising the federal funds rate, which can indirectly impact mortgages. High inflation and investor expectations of more Fed rate hikes can push mortgage rates up. If investors believe the Fed may cut rates and inflation is decelerating, mortgage rates will typically trend down.”

Over the past handful of years the Fed raised the Federal Fund Rate to combat inflation and as that happened home loan rates spiked as well. The good news is that experts agree that the forecast for both inflation and interest rates is that they both should be more favorable as this year progresses.

The 10-Year Treasury

The other factor that plays a role is that of the 10-Year Treasury Yield. Mortgage companies will also look at this and base their rates off of it. If the yield goes up, mortgage rates will often then as well. According to Investopedia “One frequently used government bond benchmark to which mortgage lenders often peg their interest rates is the 10-year Treasury bond yield.”

The trend has mostly been that the 10-year Treasury Yield and the 30-year fixed home loan rate have been pretty consistent except for lately. The good news is that this should most likely mean that there is some room for improvement on mortgage rates where they should come down a bit. These factors all play a role in why most experts and economists project that we should see favorable rates coming this year.

Beth Dickerson

Boston, MA

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About The Author

One of Boston’s most reputable real estate brokers, Beth Dickerson has achieved more than $2 billion in sales and thousands of successful real estate transactions over her nearly thirty-year tenure. Beth has received national acclaim from the real estate industry and represents some of the most prestigious residents and properties across Massachusetts. Her enduring record as a top producer comes from the intuitive gift of sensing her clients’ needs. She has built a business that is referral-based at its core—a testament to her relationship-driven approach and penchant for exceeding expectations. It is this nuanced expertise that Beth leverages to guide many of her clients-turned-friends through some of the greatest milestones of their lives.

Beth was the proprietor of her own real estate company before joining the residential division of R. M. Bradley in 1993, where she was a top producer for more than a decade. In 2003, she founded her own boutique real estate firm, Dickerson Real Estate, before merging with Gibson Sotheby’s International Realty in 2007. Today, Beth attributes her success to her comprehensive marketing and advertising strategies, exclusive contact network, and unparalleled insight into neighborhoods like Back Bay, Beacon Hill, the South End and Waterfront. With an understanding that no two clients are alike, she works with clients in all phases of life—from first-time buyers to luxury developers, seasoned sellers and beyond. Beth offers clients the resources to aggressively market their property locally, nationally and globally, and her attention to detail, drive and enthusiasm are unmatched.

Beth has appeared in prestigious media outlets including The Wall Street Journal, Mansion Global, The Boston Globe, and Boston magazine, and was prominently featured as Greater Boston’s real estate expert on WCVB Chronicle in 2020. She has had the honor of serving as President of the Downtown Council of the Greater Boston Real Estate Board. For over ten years, she has been a Co-Chair and Committee Member for the Massachusetts General Pediatric Hospital for Children’s Storybook Ball. She serves as a Board Member of the Community Music Center of Boston and a member for the Perkins School for the Blind, Emerald Necklace Park Conservancy, Justine Liff Luncheon, Youth Villages and the Boys & Girls Club of Boston, among dozens of other organizations throughout the Boston area.

A long-time resident of Boston’s Back Bay, Beth was an active member of the community as she raised her two children: she served as treasurer of the Clarendon Street Playground and was an avid supporter of the Hill House Community Center.